What are two reasons it may be preferable to price separately using approach 1?
The first bullet underneath this question is:
- There may be enough data to update the per-occurrence excess charge most often than the aggregate excess charge.
I don't understand what this means. Should it be more often instead of most often? Even then, what's the reason that we'd like to update the per-occurrence limit more often than the aggregate limit? Is it because that's the limit getting hit more often?
Comments
Typo fixed - most = more.
Since the per-occurrence limit is hit more frequently than the aggregate limit we have more data available for pricing it. It's generally advisable to update/refresh rating factors once you have sufficient data rather than waiting until you have enough data to update all rating factors at once.